ET Now: What is your view on RCom, given the company has received as received indicative non-binding bids for a controlling 51 per cent stake in arm Reliance Infratel.

P Phani Sekhar: Without getting into specific ‘buy’ or ‘hold’ advice, one must appreciate that a large part of the enterprise value of Reliance Communications is debt and equity constitutes a very small part. Therefore, any such deal which tackles debt will have a huge affect on the residual equity. I would not be surprised if the stock sees much better rally from here, although that does not constitute a long term ‘buy’ or ‘hold’ advice.

ET Now: But do you think given the fall that the stock has seen on account of just being an over-leveraged company, that this development could make the stock attractive at the current levels vis-à-vis its peers a Bharti or an Idea?

P Phani Sekhar: There are two aspects to this. In the first phase, it will cut down on debt and get a breathing space. Ultimately valuations in the long term are always a function of what kind of growth, and how comfortably you are positioned in the ever changing industries like telecom. To my mind, RCom is not any longer the front runner. With the impending competition coming from Reliance Jio, the challenge will be much higher for RCom. I would like to look at this piece of news as some kind of a opportunity for a relief rally in RCom. What the telecom operator would do with opportunity is going further is something that only future will tell.

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